Alphabet stock falls 10% as record AI spending wipes out cash flow
Alphabet burned US$9.07 billion in free cash in Q3 as AI capital spending accelerated, missing both profit and revenue targets.
Alphabet reported negative free cash flow of US$9.07 billion in the third quarter. The cash burn jumped from US$5.9 billion in the prior quarter, which was the first time in the company's 22-year history as a public company that it went into the negative.
The loss was driven by massive spending on cloud capacity and AI research infrastructure. Total revenue fell short of expectations at US$127.6 billion versus the forecast US$128.2 billion, and net income fell 25 per cent to US$26.17 billion.
The core advertising business reported US$82.01 billion in revenue, about US$1.41 billion short of expectations. Google Cloud revenue doubled and exceeded forecasts, but not enough to offset the ad shortfall.
Sundar Pichai, CEO of Google and Alphabet, noted the company is now on a half-trillion-dollar revenue run rate and highlighted that Gemini, the AI assistant, has reached one billion users. Capital expenditure will increase significantly in 2027.
Why it mattersInvestors face the tension of needing AI investment to stay competitive versus the risk of runaway spending with unclear returns.
AustraliaAustralian tech investors and businesses relying on Google services face uncertainty over how aggressive the company will be in cutting costs to return to positive cash flow.
✓ Claims checked against the source and corrected before publish. checked 4 h ago
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